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Google Claims Less is More on Click-Throughs

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Google isn’t evil and it isn’t being beaten down by the recession or fewer click-throughs on its ads. At least that’s the message CEO Eric Schmidt tried to convey during an interview with Maria Bartiromo that will air on CNBC after the close of markets today.

The grown-up Googler sat down with the Money Honey for a frank talk about Google’s most recent earnings, its plans to move into more enterprise applications, its hopes for monetizing YouTube, mobile phones — even its particpation in the 700MHz auction. Oh and how it’s still trying to avoid being evil.

The good news is that Google is still focused first and foremost on advertising, in particular on gaining as much share of that market as possible. The bad news is the click-throughs rates for search advertising in the U.S. are down, which prompted investors to shear some 40 percent off the firm’s market cap from the beginning of the year through mid-March, when numbers showing poor U.S. click through data surfaced. Schmidt argues that the lowered click-throughs will actually result in higher revenue because the quality of the ad viewer is higher — there is less casual clicking. He also points out that recessions drive advertisers to spend money on ad formats such as search because they can tell how effective those ads are.

Recessions do tend to drive advertisers toward measurable campaigns, and Google will likely benefit. However, the decreased click-through rates are something those not just Google’s investors are watching, but many in the startup community as well. Are consumers becoming more leery of search ads and tuning them out or are they really getting better at determining which ads are relevant to them, resulting in fewer, but higher-quality, clicks? The answer to that question could determine the success of many of the web-based consumer service providers hoping to make money on new ad formats — and on Google AdWords.

7 Responses to “Google Claims Less is More on Click-Throughs”

  1. The reduction in click throughs is the result of a dramatic decrease in clickable area on Adsense (content network) ads.

    It’s not that users have suddenly become used to search ads or that they are selecting which ads to click now.

    It’s just that you can now only click on the ad title or url at the bottom of the ad. You can no longer click on the white space or body text of an ad.

    This results in higher quality click throughs as users are not accidentally click on the whitespace.

    The reason this was a problem was that a lot of sites placed their adsense units very close to the site navigation in the hope of getting these accidental clicks. Now the clicks should only come from users who really wanted to click on the ad.

    Google made this change a few months ago and the share price tanked because nobody understood the reasoning behind the change. The massive drop in click throughs were mostly accidental clicks on whitespace so were of no value to the advertisers.

    Making this change was brave and will mean more ROI for advertisers which is better for Google in the long run.

    They probably should have explained it better though as every article I read about Google’s drop in click-throughs doesn’t explain the reasoning behind it.

  2. I’ve been using Google Adwords for a number of years and have learned (at a cost!) that you’ve really got to get your ads and keywords absolutely spot on to get the best results.Plenty of testing and re-testing is required to come up with the correct formula for each campaign. I’m pleased to report that most of my campaigns now achieve between 3-5% CTR so at last my returns are definitely outstripping my costs!

  3. I agree! I think people have been put off by in-effective ads in the past so no longer see the good ones.

    Google should turn up the notch on the quality score/ad & landing page relevancy algorithm. This will make advertisers be all that more careful when creating ads and making them useful and something the users can trust.

    I saw a paid search ad for eBay last week; it read: “condoms, new and used, get them on eBay” – hardly generates trust in the paid search space.

  4. austinandrew

    I think we’re entering an era of “text ad blindness”, similar to “banner blindness” of the late 90s. People don’t pay as much attention to them anymore.